The Russian Parliament has just dealt the latest blow to the regulated forex industry in the country. A legislative effort started by the Association of Forex Dealers (AFD) was turned down.

The representatives have turned down a proposal set out by the brokers which were pleading for a less stringent client verification methodology.

Local media outlines that the governor of the Bank of Russia, Elvira Nabiulina has been very vocally opposed to the industry. The position of the Russian government and now parliament is confirming the stance of local authorities.

The legislative effort has been designed to counteract some tough anti-money laundering requirements. The document has been discussed in the Russian parliament since May 2018.

Offshore Brokers

The legislation which the Russian government introduced is clearing the way for offshore brokers to keep attracting clients from the country. The tough regulatory framework pushed businesses offshore and led to fewer protections for Russian citizens willing to trade forex.

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A month after the new legislative effort has been introduced in the parliament, the Head of the Russian Central Bank, Nabiulina said that the central is opposing the measure.

The news is not unexpected as the Russian government has been consistently opposing the involvement of its citizens in high-risk leverage trading.

Russian companies are forbidden from identifying their clients remotely and need to confirm their identity in person. The operational costs of the brokerages are too high to maintain, and clients have been moving offshore ever since the regulation of the Russian market.

Money Laundering Concerns

Despite the vocal opposition of the central bank, the biggest concerns of Russian authorities are related to money laundering.

In a statement, Russian authorities clarified their position: “The introduction of remote identification of clients can be possible only when the risks for money laundering of illicitly obtained income is eliminated.”

The Russian parliament also highlighted risks related to terrorism financing when clarifying its decision.